Analysts indicate MGM China Holdings reported underwhelming 3Q24 results, with property EBITDA falling short of expectations due to increased non-gaming expenditures, potentially signaling challenges in maintaining margins.
According to CLSA’s recent analysis, MGM China’s property EBITDA for 3Q24 declined by 19 percent quarter-on-quarter to HK$1.98 billion ($255 million), falling 2 to 3 percent below consensus estimates and CLSA’s forecasts. Increased spending on non-gaming events and ongoing property refurbishments at MGM Macau were primary contributors to the EBITDA decline.
MGM China recently launched its new residency show, Macau 2049, set to debut in mid-December. While the show’s costs have not been disclosed, it is part of MGM’s 10-year gaming concession commitment to invest $2.1 billion in Macau, with nearly 90 percent earmarked for non-gaming projects.
While a slight market share decline was anticipated, CLSA noted the unexpected severity of the margin contraction. The 17-year-old MGM Macau is undergoing phased upgrades scheduled for completion by mid-2025. Although these renovations are expected to have a manageable impact, they are likely to limit the potential for margin expansion in the near term.
In terms of overall performance, analysts Jeffrey Kiang and Leo Pan noted that MGM China saw a 9 percent decline in aggregate net revenue, dropping to HK$7.25 billion ($933 million). Gross gaming revenue (GGR) also fell by 10 percent QoQ to nearly HK$7.92 billion ($1.02 billion), with the company’s GGR market share slipping by 1.3 percentage points QoQ to 14.7 percent.
Operational expenditures (Opex) rose 5 percent QoQ to HK$2.09 billion. This rise in Opex, coupled with the revenue decline, contributed to a 3.3 percentage-point contraction in the EBITDA margin, which settled at 27.4 percent. CLSA highlighted that MGM China’s adjusted property EBITDA dropped from $294 million in 2Q24 to $237 million in 3Q24.
The performance across MGM’s properties was similarly affected. At MGM Macau, net revenue dropped by 7 percent to HK$3.04 billion ($391 million), with adjusted property EBITDA declining by 19 percent to HK$802 million ($103 million). The EBITDA margin for MGM Macau was recorded at 26.4 percent, reflecting a challenging quarter for the property.
At MGM Cotai, net revenue declined 10 percent QoQ to HK$4.21 billion ($542 million), with adjusted property EBITDA also decreasing by 19 percent to HK$1.18 billion ($152 million). Despite improved win rates across both VIP and mass gaming segments, these gains were overshadowed by significant declines in rolling chip volume and mass drop, which fell by 36 percent and 15 percent, respectively.
Looking ahead, MGM China plans to introduce new suites in phases across both Macau and Cotai by the second half of 2025, with the aim of increasing its total room count by 25 percent by the end of that year. This expansion is expected to drive future growth, even as the operator faces short-term challenges.
3Q24 performance likely to be baseline
In another analysis by Deutsche Bank, MGM’s 3Q24 margins reached 25.5 percent, approximately 270 basis points below projections. These margins declined about 330 basis points from 2Q24 and decreased by 230 basis points year-over-year.
According to MGM’s management, the margin contraction was largely driven by increased investments and entertainment expenses. The company anticipates that the current 3Q24 margin levels will establish a near-term baseline, setting the stage as MGM continues to expand within Macau’s market.
Despite margin pressures, MGM has maintained solid market traction in Macau. The operator’s GGR market share stood at 14.6 percent in 3Q24, slightly lower than the 15.9 percent reported in 2Q24 but aligning with the 14.5 percent seen in 3Q23. MGM’s management remains optimistic about sustaining its market share in the mid-teens, pointing to Macau’s market resilience and projecting continued growth momentum in the quarters ahead.
Deutsche Bank also highlighted MGM China’s 3Q24 gains, which underscore the operator’s upward trajectory. MGM reported property EBITDA for 3Q24 up by about 30 percent from 3Q19 and marking a 5 percent year-over-year increase. This growth was primarily fueled by mass gaming, with the company experiencing a promising start to 4Q24, thanks to a robust Golden Week turnout.
While mass gaming (slots and table games) increased by 21 percent year-over-year, VIP segments faced challenges: rolling chip volume dropped by 8 percent, and VIP GGR declined by 25 percent, indicating softer though anticipated hold levels within this segment.
